After the enactment of the One Big Beautiful Bill Act (OBBBA) in July 2025, there were several modifications to the two of the pillars of the US taxation of offshore income. Specifically, these changes apply to Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII) regimes.
GILTI requires US shareholders of Controlled Foreign Corporations (CFCs) to include certain offshore earnings in their US taxable income, even if these profits remain overseas, as a safeguard against shifting income to low-tax jurisdictions.
Under NJ law and legislative changes effective for privilege periods ending on or after July 31, 2023, the state of NJ considers GILTI as a dividend for Corporate Business Tax (CBT) purposes, eligible for the dividend exclusion. For Federal purposes, GILTI income can be partially offset by a 50% deduction under Internal Revenue Code (IRC) Section 250. NJ notably does not conform to this deduction.
Conversely, under IRC Section 250, FDII offers a tax incentive by granting a preferential deduction for income from goods or services sold abroad or from licensing intangible assets overseas. This policy encourages U.S. companies to export and retain, or perhaps transfer intellectual property within the US. Correspondingly, the associated federal deductions allowed under IRC Section 250 related to FDII and GILTI are also not allowed under New Jersey law.
Beginning after December 31, 2025, federal law under OBBBA introduces new terminology to reflect the OBBBA changes – GILTI becomes Net CFC Tested Income (NCTI), and FDII becomes Foreign-Derived Deduction Eligible Income (FDDEI). For more information on the international tax changes under be OBBBA, click here.
From a New Jersey perspective, the State has confirmed that this terminology change alone does not impact state tax treatment. In practice, NCTI will continue to be taxed like GILTI for CBT purposes, with dividend relief still available. FDDEI will continue to behave like FDII and the deductions under IRC Section 250 (including the new 40% NCTI deduction) continue to be disallowed for NJ purposes.
New Jersey has indicated these changes in a published guidance which can be found here.
Please contact your WG tax advisor if you have any questions.
